1. Select Committee on Finance Provincial Budgets and Expenditure 4th quarter 2016/17
National Treasury 1

2. National Treasury manages fiscal risks in the provincial sphere of government in the following ways:
Co-ordinating the provincial budget processes through;
Benchmarking provincial budgets, with a special focus on social services and concurrent functions
Monitoring and analysis of provincial spending including publishing expenditure reports quarterly including;
Conditional grants allocations, monitoring, reporting and rollover co-ordination
Compliance enforcement and interventions, including with holding and stopping funds in accordance with the Division of Revenue Act
Provincial visits - 4th Quarter spending and infrastructure visits
Briefing Finance Minister and MECs on fiscal risks in the provincial sphere through intergovernmental forums such as Budget Council;
Capacity building and training
Introduction

3. Adjustments to main budgets: 2016/173 3

4. Provincial aggregated budgets and expenditure as at 31 March 20174

5. Are provinces controlling Personnel?

6. Limpopo Provincial Expenditure as at 31 March 2017

7. Summary of observations and fiscal risks
Education and Health Personnel
By 31 March 2017, Education had reduced personnel numbers by [i.e. from to ] due to amongst others, high attrition rate and the prolonged filling of vacant posts, hence the huge underspending in compensation [R373.8m]. Whilst Health, had a reduction of 895 from to by the end of the previous financial year. This is due to the high attrition rate in the third and fourth quarter that resulted in the huge underspending in compensation [R252m]. This can also be attributed to the controls on personnel by Office of the Premier and Provincial Treasury of the Departments.
Spending as at 31 March 2017
LPG had spent R57.8 billion or 97.8 % of its adjusted budget [R59 billion] with an underspending of R1.3 billion [Pre-audited] by all departments. The departments that had contributed to this, mainly include, Education [R662.7 million], CoGHSTA [R150.9 million], DPWRI [R138.1million] and Agriculture [R110.5 million]. The key reasons vary, ranging from delayed processing of payments due to the industrial action by employees and prolonged filling of vacant posts in Education, delays in procurement in DPWRI, abolishment of redundant posts and reducing personnel budget in Agriculture and high attrition rates and the industrial action by employees by Health.
In terms of economic classification, the bulk of underspending [R621million] is on compensation of employees and Education [R373.8 million], Health [R252 million], Agriculture [R71million] and DPWRI [R52.4million]. This can be attributed to the controls on personnel by Office of the Premier and Provincial Treasury.
LTSM - Education had an adjusted LTSM budget of R582.5 million which was underspent by R7.4 million or 1.3% after an additional amount of R8 million allocated during 2016 budget adjustment. There has been a drastic increase in spending on this item (R392.7 million) at the end of the 2016/17 financial year due to verification and late delivery of materials.
Medicine and Medical supplies had overspent their respective adjusted budgets, especially the latter with R70.4 million or % due to inadequate budgeting which is a matter that both the Department and Provincial Treasury must look into, but must be weary of not feeding into inefficiencies. Whilst lab services had overspent its adjusted budget of R393 million by R5.4 million or 1.4 % following an additional R204 million during adjustment process.
Another serious challenge in Health, is an underspending of R215.6 million or 41.1 % on contractors [after an upward adjustment of R286.8 million] and the implication this would have on job creation. The underspending on contractors is mainly due to delays in the appointment of service providers for infrastructure and the late submission of invoices.

8. Limpopo: Accruals and Payables not recognized: 2016/178 8

9. Northern Cape Provincial Expenditure as at 31 March 2017

10. Summary of observations and fiscal risks – Northern Cape
The aggregate provincial spending is at R15.2 billion or 98.5 per cent as at 31st March 2017 resulting to R237.9 million underspending.
Only Education overspent, while all other provincial departments underspent including those that projected to overspend throughout the financial year.
Conditional grants spending is at R3.6 billion or 95.5 per cent and underspent by R million.
The province overspent COE allocation by R122.3 million or 1.5 per cent only on the following three departs: Education, Health and Transport, Safety and Liaison.
Education
Overspent the vote allocation by R65.2 million or 1.2 per cent mainly on COE and transfers and subsidies
Appointment of temporary teachers at the beginning of the 2016 academic year due to the increase in leaner numbers has contributed on COE overspending.
Total personnel number increased by 187 between April 2016 and March 2017.
Transfers overspent due to leave gratuities paid to employees (educators and officials) who have resigned during the financial year.
The department lost a total of 518 employees in 2016/17 through resignation (283) and retirement (235)
Goods and services underspent its allocation due to cost containment: this includes savings of 63 per cent on LTSM, the focus in 2016/17 was mainly on procuring the top-up material.
Overall goods and services savings will be utilised to augment the overspending on COE.
Summary of observations and fiscal risks – Northern Cape

11. Summary of observations and fiscal risks – Northern Cape continued …
Health
Underspent its adjusted appropriation by R125.3 million or 2.8 per cent.
Mainly under Health Facilities Management due R116 million under spending on Health Facility Revitalisation Grant as a result of delays on the ongoing infrastructure projects.
NHI underspent by 25.6 per cent or R2.6 million due to procurement of goods and services including training materials and medical supplies not yet delivered at year end.
Rollover requests have been submitted for the these grants.
COE overspent by R49.3 million or 2.2 per cent due pressure on personnel costs including OSD rank translations, grade progression and improved qualifications implemented.
The department promoted a total of 54 officials to another salary level of which 46 per cent on a permanent highly skilled supervision (levels 9-12) - vulindlela HR oversight report
Goods and services underspent by R14.9 million or 1 per cent.
Underspending is mainly under the following: Laboratory services, Training and development and Fleet services (including government motor transport)
The following items overspent its allocations: Contractors, Communication (G&S), Computer services, Consumable supplies and Operating leases.
Health patient fees under collected by 36.2 per cent or R18.8 million due to challenges on the billing systems
2016/17 bank balance closed with an overdraft of R126.4 million (PMG account) due to accrual and the unauthorized expenditure from the previous financial year.
Summary of observations and fiscal risks – Northern Cape continued …

12. Summary of observations and fiscal risks – Northern Cape continued …
Social Development
Underspent by R47.6 million mainly on personnel and capital
R43.3 million on payment for capital assets due to delays on the construction of substance abuse treatment centre as a result of the litigation on the project. R43 million is requested to be rolled over to the next financial year.
This will further delay the operationalisation of the centre, which was targeted for 2017/18
COE underspent by R6.4 million due to funded vacant post that are not filled.
Sport, Arts And Culture
Underspent by R22.9 million or 6.4 per cent mainly under Library And Archives Services.
Community Library Services Grant underspent by R18.7 million due to the delays by the implementing agent (DRPW).
An amount of R13 million has been requested to be rolled over to the next financial year to completed the current infrastructure projects under way.
Cooperative Governance, Human Settlements And Traditional Affairs
Closed the current financial year with the PMG overdraft balance of R104 million due to unauthorized expenditure.
Summary of observations and fiscal risks – Northern Cape continued …

13. Northern Cape: Accruals and Payables not recognized: 2016/17

14. Bank balances 2016/17 – Northern Cape
The provinces closed 2016/17 with an overdraft of R167.6 million mainly under PMG and CPD account.
Overdraft on PMG is mainly on Health, Education, and COGHSTA due to unauthorised expenditure and accruals from the previous financial years.
Overdraft on CPD is mainly as a result of R466 million additional allocation from the provincial reserves during the 2016/17 adjustment budget to finance amongst others things, the accruals of Health and other provincial priorities
The closing bank balance is a matter of concern given that it will affect the implementation of 2017/18 budget.

15. Education - Learner and Teacher Support Material

16. Health - Medicines and Medical Supplies

17. Health - Laboratory Services

18. 2017 Tabled Provincial Budgets18

19. 2017/18 Proportionate MTEF Budgets19

20. Compensation over the 2017 MTEF

21. 2017 Provincial Fiscal Framework - Limpopo21

22. Summary of key conclusions and Fiscal Risks over the 2017 MTEF - Limpopo
The province has tabled a surplus budget over the 2017 MTEF which is reserved for provincial priorities and unauthorized expenditure that is approved with funding. In a nutshell, the overall change to baselines reflects an increase over 2017 MTEF period due to the increasing transfers from national government.
Key Risks
The wage bill of the Province is still high and the efforts to manage the recruitment process is managed by OTP and Provincial Treasury in prioritizing front line services. However, a clearly defined strategy is also needed to deal with the current incumbents in the public sector and not only new entrants.
Province needs to relook at Health budget baseline considering the continuous bail out during adjustment estimates and additions over the MTEF.
LPT to continue to strengthen itself to prevent relapse and ensure vigorous support for the effective implementation of S18 at Education.
The expenditure on infrastructure is low and considering that it is mostly grant funded, there is a risk of loss of funds and a further reduction in the following year’s allocation due to the low ability to spend. Strategies that will lead to improvement in infrastructure planning and delivery.

23. 2017 Provincial Fiscal Framework – Northern Cape

24. The province budgeted a surplus of R1
The province budgeted a surplus of R1.2 billion over the 2017 MTEF for the debt redemption strategy, town revitalization, provincial priorities and the ICS shortfall.
The province start 2017/18 on a bank overdraft of R167 million which might affect the implementation 2017/18 budget.
This is mainly on Health, Education and COGHSTA due to unauthorized expenditure and accrual from 2015.
Accumulated irregular expenditure poses a risk to the provincial envelope.
Personnel management.
The province has moratorium in place on which only the critical position are being filled. All provincial departments underspent on COE in 2016/17 except Education, Health and Transport, Safety And Liaison.
Current overspending on the above mentioned departments undermines the efforts of the province to manage and contain personnel expenditure.
COE for the Health and Education is likely to overspend in 2017/18 given the current over spending and the low growth in 2017/18. Growth is below the inflationary projection on both departments.
Education – LTSM has been well provided for in 2017/18.
Health
Overall budget shows minimal growth of 1.5 per cent in 2017/18 and 4.1 over the MTEF.
Goods and service budget decline by 8 per cent, the following core items area affected: medicine, medical supplies operating leases and property payments. Due to over spending in the current financial year as result of accruals.
Operationalisation of new health facilities will remain a challenge in the province over the MTEF.
Summary of key conclusions and Fiscal Risks over the 2017 MTEF – Northern Cape

25. Health
Accruals continue to pose a high risk goods and services with in the department.
Irregular expenditure has accumulated to R5.8 billion which is equivalent to the total budget for 2017/18.
Sharp increase in medico-legal claims which has accumulated from R174 million in March 2015 to R342.8 million in March However, the settlement in 2016/17 has been very low at R against the high amounts of claims lodged.
The provincial EXCO has placed the department under section 18 (2) (g) of the PFMA
Growth have been reduced on the following non-essential items: advertising, catering for departmental activities, communication, venues and facilities, minor assets as well as travel and subsistence.
Provincial Own revenue.
The main provincial own revenue items (Casino taxes, Liquor licenses and health patience fees) under collected against the projected revenue targets for 2016/17, and poses a risk of under collection over the MTEF.
The province has indicated the following on their budget to improve revenue collection:
The province is focusing on assisting department of Health to improve revenue collection by strengthening systems at center of collection.
Establishment of inspectorate unites which will assist in strengthening internal control in all revenue collection centers. Increase number of inspectors to eradicate the illegal gambling in the province.
The Provincial government has resolved to move the function of motor vehicle license fees to the South African Post Office due to challenges experienced with municipalities in the province.
Summary of key conclusions and Fiscal Risks over the 2017 MTEF - Northern Cape continued …

26. Thank You 26